Holding The Line

Kelly Lines looks at the pitfalls lurking within a price-driven insurance market and the need to deliver on promise, not sing off-key.

The 1978 classic rock song, Hold the Line, by American band Toto, always provokes in me a need to:

a) ponder just what a great record it is (I sing it almost daily), and;
b) contemplate the “line” in our day-to-day insurance underwriting transactions here at DUAL Asset.

In my nearly 15 years (gulp) in underwriting title insurance, I don’t think the UK market has ever been as competitive as it is at the moment. There are, at present, around 5 monoline insurers and 10 Managing General Agents (MGA’s) – all operating in the title insurance space in the UK market.

“Well, that’s certainly great news for customers!” I hear you all shout. And yes, whilst a competitive market is tremendous for those buyers seeking and achieving a great price, is this current price-driven market really providing the best solution for a customer’s insurance needs?

Excess or Success?

In the past week alone, I have been approached to provide insurance on five separate transactions – all valued at more than £125M. Providing cover for limits of indemnity of this size and above on a standard title insurance risk is not an issue for DUAL Asset. We pride ourselves on our ability to provide insurance for high limit deals at short notice and without the caveat that it is ‘subject to reinsurance support,’ which can ultimately delay a customer’s transaction.

However, on every single one of those transactions that I have quoted I have had responses back saying: “Another provider has quoted X amount (normally a very cheap premium) to provide only a £100M of cover. Is there any way you can bring your price down for £125M?”

And that’s when Toto’s earworm song starts whirling around my head.

Why should I need to reduce what I believe is a competitive price for the full amount that the client requires just because someone else is trying to compete, but they can’t provide the full solution for the client? For example, what happens if you take that policy for only £100M with another provider, but the client wishes to sell the property in six months’ time and a new buyer insists on the limit being increased to the full value of £125M?

The original provider won’t be able to endorse it, as they don’t have the relevant capacity. The client is then forced to seek an excess line over that original insurance policy. Excess line insurance protects against a financial risk that is too high for a regular insurance company to take on. Typically, that excess line finds its way back to us here at DUAL Asset, which we are more than happy to provide for a premium.

About Excess Line Insurance

• Excess line insurance protects against a financial risk that a regular insurance company can’t take on
• Because the risks are so high, surplus lines insurance is more expensive than regular insurance
• Lloyd’s of London dominates the total surplus lines insurance market with 23% market share in 2016 and writing $23 billion in premiums

However, the client now has two separate insurance policies and has wasted time and money in trying to negotiate new cover when DUAL Asset could have just provided the full amount at the beginning. Was that really the best solution for the client?

Should we continue to hold the line we underwrite?

As the song goes: “It’s not in the way you look or the things that you say that you’ll do.”

At DUAL, we just deliver.

If you have any questions please contact Kelly Lines, Senior Underwriter, DUAL Asset Underwriting on +44 (0)20 7337 8761 or [email protected]